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2016 (7) TMI 32 - HC - Companies LawScheme of Arrangement in the nature of Demerger and Transfer of the demerged Undertaking - Held that - The observations made by the Regional Director, Ministry of Corporate Affairs, have been suitably addressed and hence do not survive. This court has come to the conclusion that the present scheme of arrangement is in the interest of its shareholders and creditors as well as in the public interest and the same deserves to be sanctioned. Prayers in terms of paragraph 23(a), and (b) of the Company Petition No. 186 of 2016 for the Demerged Company including the Restructure of Share Capital in form of Utilisation of Securities Premium Account to the extent required as proposed vide clause 15 of the scheme are hereby granted. Similarly prayers made in terms of paragraph 17 (a) of the Company Petition for the Resulting Company are hereby granted.The petitions are disposed of accordingly.
Issues:
Petitions for sanction of Scheme of Arrangement, Demerger, and Transfer of Undertaking under Companies Act, 1956 and 2013. Analysis: The petitions were filed by two companies seeking court sanction for a Scheme of Arrangement involving the Demerger and Transfer of the Ceramic Division of one company to another, along with a Restructure of Share Capital. The purpose was to segregate activities of the Demerged Company related to different products due to distinct business dynamics and market segments. The benefits of the proposed scheme were detailed in the petitions. The scheme also involved the restructuring of the Capital of the Demerged Company by utilizing the Securities Premium Account to adjust the net asset value of the demerged undertaking. This proposal, though consequential, was considered an integral part of the scheme. The court dispensed with certain procedural requirements based on the submissions made. Meetings of Equity Shareholders, Secured Creditors, and Unsecured Creditors of the Demerged Company were convened and held to obtain approval for the scheme. The scheme was unanimously approved by the respective stakeholders. For the Resulting Company, the meeting of Equity Shareholders was dispensed with due to consent letters on record, as there were no Secured or Unsecured Creditors. The court noted the absence of objections to the petitions even after due publication. Observations made by the Regional Director of the Ministry of Corporate Affairs were addressed in detail, including issues related to accounting treatment, reserves, compliance with the Income Tax Act, and objections received from concerned authorities. After considering all facts and contentions, the court concluded that the scheme was in the interest of shareholders, creditors, and the public. The prayers for sanctioning the scheme and restructuring the share capital were granted for both companies. Costs to the Central Government were quantified, and directions were given for stamp duty adjudication, filing with concerned authorities, and issuance of authenticated copies of the order. In conclusion, the petitions were disposed of, and all relevant authorities were directed to act upon the court's order promptly.
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